MLM Glossary – P

Passive Income:

Also known as residual income and leveraged income in the network marketing industry. Passive Income is a type of earnings received regularly by a member with little effort needed to sustain it, and is a result of earlier work to establish a constant income-generating MLM business. As opposed to a regular income, passive income is continually received even after the member lessens his or her workload. A regular income, on the other hand, is fixed and received for the work done for a particular period. The member earns passive income from his downline members by receiving commissions from their sales of the business’ products or services. He or she can also earn from direct customers who regularly buy products or services.

Personal Volume (PV):

Personal volume is generated by a distributor’s personal purchases, retail customers’ purchases, or a combination of both.

Policies and Procedures:

A set of rules, principles and guidelines designed by a particular network marketing company or organization for the interest of both the company and the members. These usually include goals, protocols and methods that bind the business and its sales force. Once a prospect joins a particular organization, he is expected to accept and comply with the policies and procedures that the company has outlined.

Prelaunch:

A term used when a new MLM business is introduced to the market. During a prelaunch, the company and its products or services are introduced, informing prospective distributors what to expect if and when they join the company. Prelaunch publicity is meant to excite potential consumers or members into becoming a part of the company. It can act as an opportunity for entrepreneurs to build their team before the official launch.

Presentation:

A presentation is the method of displaying and explaining a company’s profile, compensation plan, and products or services. It may be on a one on one, webinar, group setting, or a crowd presentation via a convention or conference. Presentations typically contain information regarding business opportunities and are aimed to attract prospects to enroll in a particular networking business. It usually includes tools such as videos, brochures and other materials that show how the business works and the benefits offered to members.

Products:

Refers to the merchandise or goods a multi-level marketing company offers to consumers. Products may come in various forms such as cosmetics, food supplements, clothing, toys and other marketable goods that cater to a variety of markets. Legitimate MLM businesses normally provide their new members a starter kit which contains products equivalent to the signup fee the members pay upon enrollment. The kit may be sold, used for personal consumption, or used for presentation purposes when encouraging prospects to join the company. Commissions and revenues come from the proceeds of products sold by the distributor and his members (downline).

Productivity:

Productivity is defined as the ratio of output to inputs in production. The higher the output, the better the productivity. The success of a network marketing business is measured through productivity. The continuous building of an efficient and dynamic team plus constant movement of the company’s products through retailing can significantly contribute to the positive productivity rate. This is achievable through the efforts of both the company and its members.

Profit:

Profit refers to the net proceed a distributor or retailer receives after the sale of goods or services. In network marketing, products/services are sold to distributors or members at wholesale prices. On top of the wholesale price, distributors add a recommended markup for retailing to end users. Whatever proceeds from the sale of products (minus the wholesale price) becomes the profit of the distributor who sold the goods. Profit may also come from distributors’ team members who duplicate the efforts of their leaders by increasing the productivity and revenue of the entire MLM business. For network marketers, the life of an MLM company lies on its members and their active participation in realizing earnings.

Profitable:

Profitable refers to a business endeavor that is bringing in more returns than the investment. MLM businesses are profitable in two ways – retailing and sponsorship. A distributor or member can earn revenue by buying and selling the products or services of the company in the same way that he can also profit from the efforts of his members/downline. The more people a distributor has in his downline, the higher the earnings. To be profitable, a network marketing firm should have qualified members that keep the products/services moving.

Prospect:

A potential customer or a potential distributor, or lead. A customer prospect is a person that is interested in purchasing the product, the distributor prospect is a person that is interested in joining the company and becoming a member of the downline.

Prospecting System:

A prospecting system refers to the method of marketing towards potential customers or distributors, otherwise known as prospects. This may involve creating a prospecting list, writing and sending emails or any form an introductory letter to prospects, and cold calling and making follow-up calls. The goal of a prospecting system is to convert prospects into customers or active members.

Pyramid Scheme:

A pyramid scheme is an unsustainable model of business where an organization offers participants payment, primarily for enrolling other people into the scheme, where no actual product or service is exchanged with the public. With no revenue generated other than from the company’s own distributors, it is considered a scam as opposed to a legitimate form of business. In recent years, the Attorney General has been quick to shut pyramid schemes down before many members lose money, but that does not negate the need for researching a company before enrolling as a distributor.